Pension funds have found a new way to fritter away the cash saved by workers. It is called liability insurance.

Every pension conference is dominated by the subject. Employers with final salary-scheme guarantees, and large deficits to match, will grab at almost any product that promises to make the problem disappear.

It involves buying derivatives, swaps and hedging investments at vast expense to offset any shocks from poor investment returns or future increases in life expectancy, inflation and interest rates. All the big investment banks and their advisers are queuing up to persuade pension funds to buy these insurance products. Conference delegates, under orders from their finance directors, listen intently during sessions on "how to de-risk your fund". Outsourcing all or part of the fund to an insurance company, often at vast expense, is another option.

Earlier this week the government's lifeboat fund, which rescues bust company schemes, said it preferred a slightly different strategy. The Pension Protection Fund, which is expected to double the amount of assets it manages to £10bn, once the current crop of bust companies are admitted to its scheme, will keep a buffer fund, or separate savings pot, to cover risk, rather than pay for expensive insurance – like someone who buys new kitchen appliances and refuses to pay for extended warranties. That's not across the board. It will hedge some risks, but refuses to go down the route of calculating all risks and insuring against them.

The financial services industry has fleeced retirement funds of their cash for years with exorbitant broking and transaction fees and extortionate management charges. It cannot be allowed to repeat the trick with insurance.